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Monday, September 27, 2021

Paving the way for startups

TO encourage the development of a healthy ecosystem for entrepreneurship, what governments can do is to “get out of the way,” a United States official said.

Ambassador David H. Thorne, senior advisor to the US Secretary of State, visited Cebu last Friday for his final stop of a 12-day trip to Southeast Asia.

Thorne stressed the importance of digital connectivity in spurring the growth of entrepreneurship, noting the country’s high penetration rate but poor connectivity.

Being an archipelago makes it more difficult, which is why he said the government needs to invest in infrastructure to enhance Internet connectivity.

Apart from making it easy to start a business, Thorne also said it is important for government to make it easy to shut it down as well.

“Long processes are energy absorbers. They drain one’s energy,” he told stakeholders at a lunch organized by the Department of Trade and Industry.

What to do?

Thorne said he has heard stories of “sleeping businesses” because owners have difficulty closing their businesses down. He said business owners should not have to spend so much time working on forms, payments and other processes to start and close a business.

Another process that needs to be simplified is arbitration and dispute settlement. Thorne said businesses are bound to encounter disputes and these should be easy to settle in court.

Thorne said governments should also promote the use of financial technology, as this is not only convenient for most,
but also promotes transparency and eliminates the need for middlemen.

He noticed that making payments over mobile phones is not as widely accepted here as it is in the US, and encouraged government to push for allowing transactions over mobile phones.

In terms of education, Thorne said it is government’s role to help universities and colleges commercialize products developed by their research and development departments.

He urged governments to create an ecosystem where research and development can easily transition out of the university setting and become commercialized.

He lauded the country’s efforts in developing the business process outsourcing (BPO) industry, citing the government support and policies enacted with the cooperation of the private sector and academe.

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“Your BPO system is incredible. What was done to help the BPOs could be done to help encourage entrepreneurship,” he said.

Thorne said his trip is a follow-up of US-ASEAN summit in California last month and is meant to help strengthen his country’s relations with the economic bloc.

The Startup and Innovation Roadshow was also meant to encourage the development of “a shared prosperity” between the US and the Association of Southeast Asian Nations (ASEAN).

Thorne also visited Indonesia and Vietnam before arriving in the Philippines.

Asked what he thought of the country’s startup culture so far, Thorne said it is already on the right track if government is working on finding solutions to the sector’s needs.

He also said that as the world is getting connected, it will be easier for both government and private sector to learn from examples of success stories.

Culture

Thorne also stressed the benefits of sharing information. It was noted that Philippine culture encourages keeping information hidden from competitors, something the local startup scene has tried to avoid.

Deborah Magid, director for software strategy of IBM’s venture capital group, also noted this culture.

“This cultural change needs to happen. You need to give back and help out,” she urged entrepreneurs. Magid was part of the US delegation.

In a press briefing, the ambassador pointed out that all the new jobs in the last 15 years in developed economies, including the United States, have come from new businesses.

“We want to try to push ideas of what governments can do to support startups, (including) policy reforms to encourage digital connectivity, education and sound business practices,” Thorne said.

Step one, he said, would be building or improving connectivity, which would entail “a fair amount of investment” and sustained efforts to let more foreign capital in.

Removing impediments

He explained that connectivity in the US improved rapidly on the back of a well-developed cable network and satellite infrastructure, supported by constant innovation and “a lot of competition.”

“I think you have to look at that,” he said, in response to a comment that ownership restrictions on foreign companies seeking to do business in the Philippines are holding back growth in connectivity.

“America was developed by foreign capital… A country needs to bring in foreign capital but that also makes the environment for indigenous businessmen more competitive,” the ambassador said.

“Opening up the entrepreneurial ecosystem is about removing the impediments, encouraging the free flow of ideas and having foreign capital come in.”
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